I have listed shares and fixed deposits with a few banks in my HUF account. I have two sons and a daughter. All are married. After my death, how will the HUF assets be transferred to my son? Or should I dissolve my HUF now and distribute all the assets among my sons?
HUF is a distinct legal entity and can own property in its name. Thus, the property held by a HUF does not absolutely belong to you but to all the members of the HUF. Before the Hindu Succession Act, 1956 amendment, in 2005, the daughters were not treated as coparceners. However, with the amendment of Section 6 of the Hindu Succession Act, 1956, the daughters are now treated as coparceners and have equal rights in the HUF property as those of sons. She is entitled to ask for a partition and will get an equal share in the HUF property as and when partitioned. So, if you want to distribute the HUF assets, your married daughter will have equal rights to your sons. However, she can forgo her right to the HUF property. The share which one gets on partition of the HUF should be equal, however with the consent of all the coparcener the distribution of HUF assets can be unequal or even all the assets can be given to one or two coparceners to exclude others.
HUF property rights
The law regarding succession to HUF property also changed in 2005. Earlier, the HUF property would devolve on the surviving members by survivorship, but now the share of the deceased coparcener will pass on to his/her legal heirs as per the order prescribed in Schedule 1 of the Hindu Succession Act, 1956. You can decide to bequeath your share in the HUF asset by a will but cannot gift away your share in HUF assets while you are alive.
The residual assets shall continue to be HUF assets. Your HUF can continue even after your death, and your eldest coarcener can become Karta of the HUF.
So, based on the different scenarios explained regarding how the HUF property would devolve upon the death of a coparcener, you can decide the course of action that suits you.
If you want to partition the HUF, you must make a full partition and get an order from the income tax officer taking on record such a partition. Partial partition of an HUF is not recognised under the income tax laws. The assets received on the partition of an HUF are not treated as income and are exempt under Section 10 of the Act.
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Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and on @jainbalwant on social media platform X (formerly Twitter)
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